# Chapter 15 — Contracts and Work Authorizations ## The chapter in one line Every job goes on paper. A written agreement is what gets you paid, defines what you owe, and protects you when something goes wrong. > **Disclaimer — read this first:** This chapter is **educational only and is not > legal advice.** Contract law, work-authorization rules, lien rights, and required > language vary by state. Any contract, work authorization, or clause you use must be > reviewed and approved by a **licensed attorney in your state** before you rely on > it. The points below explain *why* these elements matter — your attorney makes them > correct and enforceable for you. --- ## Let me tell you the truth A handshake is not a contract. "We talked about it" is not a contract. A text message saying "sounds good" is not a real contract. And yet most contractors run their entire business on exactly that — verbal agreements, vague understandings, jobs started on trust and a hope. It works fine… right up until it doesn't. Then there's a disagreement about scope, or price, or what "done" means, or who pays for the surprise — and the contractor has nothing in writing. He loses the argument, eats the cost, or doesn't get paid. Sometimes all three. Here's the mindset shift: a contract is not a sign that you don't trust the customer. A contract is a *professional* doing business *professionally* — and it protects the customer just as much as it protects you. **Every job goes on paper. No exceptions.** ## A contract is the partner to everything else Notice how this chapter ties the whole course together: - Your **scope** (Chapter 11) is the heart of the contract. - Your **documentation** (Chapter 14) is the proof that backs it up. - Your **insurance** (Chapter 5) covers the accident; the **contract** covers the disagreement. - Your **professional image** (Chapter 13) shows in a clean, clear written agreement. A contract isn't extra paperwork — it's where the protection you built all course gets locked in. ## What a written agreement must cover Your attorney will build and word these properly for your state. Here is *what* needs to be in there, and *why each piece matters* — point by point: **The customer authorizes the contractor to perform the work.** The document must clearly state that the customer is hiring you and authorizing you to do the work. This is the "work authorization" itself — your permission to be there and to bill. **The scope of work must be defined.** Spell out exactly what the job includes — the line-item scope from Chapter 11. The clearer the scope, the fewer the fights. **Insurance proceeds must be addressed.** On a restoration/insurance job, the agreement should address how the work relates to the insurance claim and proceeds (consistent with Chapter 10 — and stay in your lane, you are the contractor, not the public adjuster). **The ACV/RCV payment flow must be clear.** On insurance work, the customer must understand that payment comes in stages — the ACV payment first, recoverable depreciation released on completion (Chapter 10). Spelling it out up front prevents the "where's the rest of the money" conversation later. **Deductibles and upgrades must be clear.** The customer's deductible is the customer's responsibility — state it. If the customer wants upgrades beyond what the claim or original scope covers, the agreement must make clear those are an added, separate cost. **Change orders must be in writing.** This is one of the two most important clauses in the whole contract. Any change to the scope or price — added work, customer changes, hidden conditions — gets its own written, signed change order *before* that work proceeds. No written change order, no changed work. This single rule ends the most common payment dispute there is. **Customer-provided materials must be clearly stated.** If the customer is supplying any materials, the contract must say so explicitly — and make clear you are not responsible for the cost, quality, availability, or delays of materials you didn't provide. **Final payment is due upon completion.** State clearly when payment is due and that final payment is due on completion of the defined scope. Define what "completion" means (tie it to the punch list and completion documentation from Chapter 14). **Late fees and nonpayment terms.** Spell out what happens if the customer doesn't pay — late fees, interest, and the steps available to you. Customers pay differently when nonpayment has written consequences. **Photo and video permission.** Include the customer's permission for you to take photos and video of the work — both for documentation (Chapter 14) and for marketing use. Get it in writing so your before/after content is cleanly yours to use. **Work not defined is excluded.** The other most important clause. State plainly: if it is not written in the scope, it is **not** included in the price and **not** part of the job. This is what stops "well, I assumed that was included" from eating your profit. If it's not in the scope, it's a change order. ## The two clauses that save contractors the most money Out of that whole list, two will save you more money than all the rest combined: 1. **"Change orders must be in writing."** 2. **"Work not defined is excluded."** Together they close the single biggest leak in a contractor's business — doing extra, undefined, unpaid work because nothing said you wouldn't. With those two clauses, every bit of scope growth becomes a written, priced, agreed-on change order. Without them, every surprise comes out of your pocket. ## Make it routine A contract only protects you if you actually use it — *every* time, *before* the work starts, signed by the customer. The contractor who uses a contract on big jobs but "keeps it simple" on small ones will get burned on a small one. Make it automatic: no signed agreement, no work begins. A professional customer expects this. A customer who refuses to sign anything is telling you something important about how the job will go. ## Why this matters Contracts and work authorizations are how you: - **Get paid** — and get paid in full, on time. - **Define what you owe** so "done" isn't a debate. - **Control scope growth** through written change orders. - **Protect yourself** when something goes wrong. - **Look like the professional** your pricing requires (Chapter 13). This is the chapter that makes sure all the work you did in the first 14 chapters actually turns into money in your account. ## Common mistakes - **Verbal agreements and handshakes** — nothing to point to when it goes wrong. - **Vague scope** — leaving "what's included" open to argument. - **No written change-order process** — the #1 cause of payment disputes. - **No "work not defined is excluded" clause** — doing free undefined work forever. - **No nonpayment or late-fee terms.** - **Skipping the contract on "small" jobs.** - **Using a contract you found online without an attorney reviewing it** for your state. ## A real example I once ran a kitchen remodel — full job, drywall to granite to paint. The customer seemed fine, until we were two payments from done. Then she invented a story: she claimed my granite installer had swapped her custom purple sink for a different one. A man I'd trusted for years. It was a lie — her way of trying to run off without paying the balance. So I told her: give me the receipt for the sink you bought, and I'll buy that exact sink myself; if it doesn't match what's installed, I'll swap it and cover the cost. Of course it matched. Then her story changed to "I'll pay you later." I don't deal in excuses — we were 95% done, so I finished the job right, and then I went to the county and filed to have her served for court. By the time the sheriff reached her, she was calling me with the balance in full. I won that one. But it would have been far easier — and far faster — with an airtight written contract: a defined scope, clear completion and final-payment terms, and stated nonpayment consequences. Not every customer has good intentions. The contract is what protects you when one doesn't. ## Your action step 1. Have a **licensed attorney in your state** create (or review) your contract and work-authorization documents — including all the elements above. 2. Make it a **hard rule**: no signed agreement, no work starts. 3. Build a **change-order form** and use it for every scope change. 4. Make sure your contract includes the **"work not defined is excluded"** clause. 5. Use the contract on **every job — big and small.** Use the **Work Authorization & Contract Checklist + Clause Glossary** in this chapter's downloads. (All sample language is educational — attorney review required.) ## Where this connects — the end of the core course That completes the 15-chapter core. You've built the business from the ground up: your why, your legal foundation, your presence, your credit, your protection, your money, your team, your niche, your pipeline, restoration, estimating, goals, your image, your documentation, and now your contracts. But remember the idea from page one: **construction is the vehicle, not the destination.** You didn't build all this just to do construction forever. You built a machine that produces income, profit, and freedom. The two **Bonus Modules** show you what to do with that machine — **Bonus A** turns construction profit into real estate wealth, and **Bonus B** uses automation so the business runs from systems instead of from your head. Worker → Operator → Owner → Investor. You've built the first three. The bonuses are the fourth. > **Remember:** Every job goes on paper. "Change orders in writing" and "work not > defined is excluded" are the two clauses that protect your profit on every single > job you ever do.